PATTON DEVELOPERS LIMITED,,KOLKATA vs. A.C.I.T., CIRCLE - 7(1),, KOLKATA

The AO during the assessment proceedings disallowed the entire business expenses of Rs.69,76,358/- on the ground that the income shown by the assessee under the head of Profit and Gains from Business' is not to be assessed under said head but under the head Income from Other Sources. The AO stated that the business income shown comprised of Dividend, Agriculture Income, Interest income and Commission income. Dividend and agriculture income are not forming part of total income hence not to be considered. The AO held that interest being income earned on idle fund is not the business activities and the commission income earned on arranging sea commercial vessels is not the business activities as assessee lacked credentials as Custom House Agent and no agreement is entered into between the principal and assessee for arranging the Sea Vessel, but only a solitary reference of commission payment to be made to the assessee @1.75% OCF is stated. Further AO stated that the assessee has not hired any expert and the commission income is merely an artefact or subterfuge to claim the expenses and AO quoted certain case laws in support. As such as per AO these are no business activities, hence the business expenses claimed are not allowable.

The CIT(A) after taking into account the submissions of the assessee dismissed the appeal on this issue in para 5.2.4 of appellate order.

We have heard the rival contentions and perused the materials on records. The AO had not disputed the earning of income. The quantum of earning do not define under which head, the income is

The issue raised in ground no. 2 is against the order of the Ld. CIT(A) NFAC erring in law as well on facts by approving the denial of claim of deduction as business expenses of key man annual insurance policy premium loss of Rs.9,66,120/-.

We have heard the rival contentions and perused the material on record. We note that the insurance premium was paid on the policy taken for Key man, namely for director Mr. Sanjay Budhia, taken in past. The claim was regularly allowed, even during the assessment proceedings under scrutiny in the earlier assessment years. It is not the case of the AO that assessee has not paid the impugned insurance premium for the Key man insurance policy. It is not the case of the AO that the policy taken is not for a key person. We have also perused the CBDT circular no. 762 regarding taxation of Key man insurance policy. In our opinion the Key man Insurance Policy can be taken in the name of another person who is an employee or was connected in any manner with the business of the appellant. The case is squarely covered by the decision in CIT vs BN Export (2010) 323 ITR 178 [Bom]. Moreover, in view of the decision of the Hon'ble’ Apex Court in the case of Radhasoami Satsang vs. Commissioner of Income-tax(supra), the expense has to be allowed. Therefore, respectfully following the decision of the Hon'ble’ High Courts, we are

The issue raised in ground no. 3 is against the appellate order of the Ld. CIT(A) NFAC erring in law as well on facts by approving the additions of Rs. 1,66,756 us 14A of the income tax Act read with rule 8D(2)(ii).

We have heard the rival contentions and perused the materials on records. We note that the AO disallowed interest us 14A r.w. rule 8D (2)(ii), despite the fact that the interest on Housing loan was attributable to specific income under the head of House property. He himself considered the same interest amount of Rs. 1,33,68,461 as connected with the borrowings for house property, while disallowing the proportion thereof u/s 24(b). The CIT(A) in his order while deciding the deduction of interest on borrowing us 24(b) himself allowed the entire interest expenses but concurred with AO to disallow the same interest expenses u/s 14A of the Act, when there is no other interest expenses claimed other than allowable us 24(b).

The appellant stated that assessee earned only Rs. 60/- as exempt income during the year and themselves have disallowed Rs.1,824 as expenses related to exempt income of Rs.60/-. Therefore the calculation of AO of Rs. 1,33,562 under rule 8D(2) (ii) and Rs.31,370 under rule 8D(2) (iii) was wrong. Further AO disallowed Rs. 1,824 under rule 8D(2) (i), again which was already added back by the assessee in their computation of income. Considering the facts , we are inclined to set aside the order of ld. CIT(A) on this issue and direct the AO to delete the addition. The ground no. 3 is allowed.

The issues raised in this appeal are similar to ones as decided by us in ITA No.1828/Kol/2025A.Y. 2012-13. Therefore, our decision on the above would apply, mutatis mutandis, to the issues raised in this appeal. Consequently the appeal of the assessee is allowed.

In the result, both the appeals of the assessee are allowed.